3 Sell-Rated Dividend Stocks: DCIX, HLSS, WHLR

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.

While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends and subsequently result in precipitous share price declines.

TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.

These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.

The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Sell."

Diana Containerships

Dividend Yield: 15.00%

Diana Containerships (NASDAQ: DCIX) shares currently have a dividend yield of 15.00%.

Diana Containerships Inc., a shipping company, owns and operates containerships. It is involved in the seaborne transportation activities. As of August 23, 2013, its fleet consisted of nine container vessels comprising one Post-Panamax and eight Panamax vessels.

The average volume for Diana Containerships has been 265,800 shares per day over the past 30 days. Diana Containerships has a market cap of $135.9 million and is part of the transportation industry. Shares are down 1.2% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Diana Containerships as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Marine industry. The net income has significantly decreased by 145.1% when compared to the same quarter one year ago, falling from $1.59 million to -$0.72 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Marine industry and the overall market, DIANA CONTAINERSHIPS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $6.47 million or 29.12% when compared to the same quarter last year. Despite a decrease in cash flow of 29.12%, DIANA CONTAINERSHIPS INC is still significantly exceeding the industry average of -84.31%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 38.89%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 140.00% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • DIANA CONTAINERSHIPS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, DIANA CONTAINERSHIPS INC increased its bottom line by earning $0.24 versus $0.16 in the prior year. For the next year, the market is expecting a contraction of 104.2% in earnings (-$0.01 versus $0.24).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Home Loan Servicing Solutions

Dividend Yield: 9.00%

Home Loan Servicing Solutions (NASDAQ: HLSS) shares currently have a dividend yield of 9.00%.

Home Loan Servicing Solutions, Ltd., through its subsidiaries, engages in the acquisition of mortgage servicing assets. Its mortgage servicing assets consists of servicing advances, mortgage servicing rights, rights to mortgage servicing rights, and other related assets. The company has a P/E ratio of 10.07.

The average volume for Home Loan Servicing Solutions has been 549,000 shares per day over the past 30 days. Home Loan Servicing Solutions has a market cap of $1.4 billion and is part of the real estate industry. Shares are down 12.8% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Home Loan Servicing Solutions as a sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has significantly decreased to -$120.72 million or 1779.21% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • HLSS has underperformed the S&P 500 Index, declining 10.94% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Thrifts & Mortgage Finance industry average, but is greater than that of the S&P 500. The net income increased by 179.5% when compared to the same quarter one year prior, rising from $14.35 million to $40.10 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Thrifts & Mortgage Finance industry and the overall market, HOME LOAN SERVICING SOLTNS's return on equity is below that of both the industry average and the S&P 500.
  • The gross profit margin for HOME LOAN SERVICING SOLTNS is currently very high, coming in at 95.36%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 50.82% is above that of the industry average.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Wheeler Real Estate Investment

Dividend Yield: 9.70%

Wheeler Real Estate Investment (NASDAQ: WHLR) shares currently have a dividend yield of 9.70%.

Wheeler Real Estate Investment Trust, Inc. engages in acquiring, financing, developing, leasing, owning, and managing real estate properties in the mid-Atlantic, southeast, and southwest United States.

The average volume for Wheeler Real Estate Investment has been 32,200 shares per day over the past 30 days. Wheeler Real Estate Investment has a market cap of $31.0 million and is part of the real estate industry. Shares are up 1.6% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Wheeler Real Estate Investment as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income and weak operating cash flow.

Highlights from the ratings report include:
  • WHEELER REAL ESTATE INVT TR has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, WHEELER REAL ESTATE INVT TR reported poor results of -$0.27 versus -$0.04 in the prior year.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 368.4% when compared to the same quarter one year ago, falling from -$0.37 million to -$1.72 million.
  • Net operating cash flow has significantly decreased to -$0.39 million or 704.68% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, WHEELER REAL ESTATE INVT TR's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 28.93%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 322.22% compared to the year-earlier quarter.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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